Lenders To Essar Power Mahan Seek Details Of Settlement Offer From Ruia Family

Lenders to Essar Power Ltd.’s Mahan project in Madhya Pradesh have sought details of a proposed settlement plan from the company’s promoters, after negotiations to sell the project to ArcelorMittal fell through.

According to two bankers with direct knowledge of the matter, ArcelorMittal had offered to pay Rs 4,800 crore to settle the power plant’s Rs 7,500 crore debt in February. However, later, the bidder revised its offer lower to Rs 3,000 crore, citing the large liabilities associated with the power plant, the bankers said while speaking on condition of anonymity.

In contrast, the Ruia family, promoters of Essar Power, had made an offer of Rs 3,450 crore to settle Essar Mahan’s debt, which lenders are now considering, the bankers quoted above said. ICICI Bank Ltd. is the lead lender to the project.

Business Standard first reported on Thursday that lenders had asked the Ruia family to submit details of their offer for Essar Power Mahan.

The first of the two bankers quoted above said that seeking details of the settlement plans by the Ruia family is not the same thing as allowing them to take over the company. The lenders will go through the offer and examine the source of funds before coming to a decision, the banker added.

Spokespersons for Essar Group and ICICI Bank declined to comment on the developments. An email sent to ArcelorMittal on Thursday morning remained unanswered.

In September 2018, ICICI Bank had filed an insolvency petition against Essar Power MP Ltd, in keeping with the Reserve Bank of India’s February 2018 rules for restructuring of stressed assets.

However, since a number of power producers, including Essar Power, challenged the RBI’s Feb. 12 circular in the Supreme Court, the case was delayed. In April 2019, the apex court scrapped the circular and insolvency applications based on provisions within that circular were withdrawn.

Meanwhile, bankers were continuing settlement negotiations as promoters were keen to avoid insolvency proceedings.

Lenders to Essar Power Mahan are now likely to meet later this month to discuss the Ruia family’s offer.

The 1200 MW power plant in Mahan has been struggling to meet its debt obligations as it could not secure power purchase or fuel supply agreements. In 2014, the Supreme Court cancelled the allocation of captive coal mines to the project citing illegal and arbitrary allocations.

In February, BloombergQuint reported that ICICI Bank and IDBI Bank have moved various benches of the debt recovery tribunals, invoking personal guarantees worth Rs 260 crore issued by the promoters of Essar Power Mahan.

The Essar Group promoters and ArcelorMittal have been in the middle of a bitter feud owing to the Luxembourg-based steelmaker’s Rs 42,000 crore bid for Essar Steel Ltd. While the ArcelorMittal bid has been approved by the National Company Law Tribunal and the Appellate Tribunal, it is currently pending judgement at the Supreme Court. The country’s top court will decide whether the division of funds among financial and operational creditors in the Essar Steel case is fair, because the resolution plan can be concluded.